Greetings, welcome to Graham Corporation Fourth Quarter and Full Fiscal Year 2019 Financial Results Conference Call. At this time all participants’ in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to your host, Karen Howard, Investor Relations for Graham Corporation. Mr. Howard, you may begin..

Thank you, Omar, and good morning, everyone. We appreciate you joining us today to discuss Graham's fiscal 2019 fourth quarter and full year results. You should have a copy of the news release that was distributed across the wires this morning. We also have slides associated with the commentary that we're providing here today.

If you don't have the release or the slides, you can find them on the company's website at www.graham-mfg.com. On the call with me today are Jim Lines, our President and Chief Executive Officer; and Jeff Glajch, our Chief Financial Officer. Jim and Jeff will review the results for the period as well as our outlook. We will then open the lines for Q&A.

As you are aware, we may make some forward-looking statements during this discussion as well as during the Q&A. These statements apply to future events and are subject to risks and uncertainties as well as other factors, which could cause actual results to differ materially from what is stated on the call.

These risks and uncertainties and other factors are provided in the earnings release and in the slide deck as well as with other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at www.sec.gov.

I also want to point out that during today's call, we will discuss some non-GAAP financial measures, which, we believe, are useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

We have provided reconciliations of comparable GAAP to non-GAAP measures in the tables accompanying today's earnings release. And with that, it is my pleasure to turn the call over to Jeff to begin.

Jeff?.

Thank you, Karen, and good morning everyone. If I could – have you turned to Slide 4? Q4 sales grew 7% to $23.6 million. In the quarter, we had a net loss of $4.6 million, which is primarily due to an impairment charge of $5.3 million related to our commercial nuclear utility business, which we've decided to divest.

We've initiated the process and are in serious negotiations with a potential buyer. Excluding the impairment charge, we had net income of $800,000, or $0.08 per share. Orders in the quarter were $21.6 million yielding a $132.1 million year-end backlog, which while just below the Q3 backlog was easily a record for year-end backlog.

For the full year, revenue grew 18% to $92 million. Full year net income was a small loss of $300,000, but was a $5 million of income when excluding the aforementioned impairment charge. Orders for the year were just above $101 million, and again, the backlog at the end of the year at $132 million. On to Slide 5.

Q4 earnings were similar to the same quarter last year with a 7% higher sales offset by lower gross margins, about 210 basis points below last year's Q4. The lower margins was primarily due to the commercial nuclear utility business as well as one China project.

Sales in the quarter were 70% domestic, 30% international, which compares to 66% domestic and 34% international last year. The similar EBITDA and EPS numbers are adjusted for the impairment charge. On to Slide 6. For the full year, sales increased to $91.8 million from $77.5 million.

Sales were 65% domestic, 35% international, compared with 67% domestic and 33% respectively, last year. As a side note, our commercial nuclear business, which as I mentioned, we're planning to sell, represented above 9% of fiscal year 2019 sales.

Gross profit for the year was $21.9 million, up from $17 million, primarily due to higher volume as well as 200 basis points higher gross margin at 23.9%. SG&A was $17.9 million, up from $15.8 million last year as we are investing in our business for future growth.

The adjusted EBITDA margin was $7.7 million, up from $5.4 million last year, and the adjusted net income per diluted share or EPS was $0.51 compared with $0.18 last year. If we could move to Slide 7. Our cash position increased $1.3 million in fiscal year 2019 to $77.8 million or $7.90 per share.

We had good operating cash flow, paid $3.8 million in dividends and spent $2.1 million in capital spending in the year. In fiscal year 2020, we expect capital spending to be in the $2.5 million to $2.8 million range.

Finally, as we look at our balance sheet and our strong cash position, we continue to have our business development team, our management team and our Board focus on the utilizing that balance sheet to opportunistically identify and close on acquisitions, which have both near and long-term benefits to our shareholders.

We continue to be excited about the opportunities that we're seeing in our acquisition pipeline. Jim will now Jim will now complete our presentation on fiscal year 2019 and comment on our outlook for fiscal 2020. Thank you..

Thank you, Jeff. Good morning everyone and thank you for joining our fourth quarter conference call. I'll picking up where Jeff left off at Slide 9. Refinery and petrochemical end markets showed improvement compared to a quarter and full year comparison. This principally was due to stronger activity in our domestic markets.

For refinery sales, there was a good mix of domestic sales to independent and integrative refiners. In most cases, these sales were for revamp and the bottlenecking projects where refiners invested to improve either throughput or conversion of crude oils to fuels.

Important to note in full year revenue was replacement and metallurgical operations from our installed base in the Canadian Oil Sands region. I highlight that because one order was rather larger and not necessarily repeatable.

Quarter-over-quarter, refining and market sales were up $1.7 million and for the full year sales, more than doubled compared to those of our fiscal 2018. Likewise, chemical and petrochemical end-market sales are up due to ongoing strength in our domestic markets.

Low-cost natural gas in North America, which is a principal feedstock for the chemical industry, is what has spurred U.S. investment in new capacity and for revamping or bottlenecking the installed base. Chemical industry sales doubled quarter-over-quarter and are 20% on a full year basis.

Sales through other markets, including defense are down quarter-over-quarter and year-on-year. The primary cause of this, which we did address a couple quarters back, is a push in fabrication scheduled for certain enabled orders of backlog.

This impacted 2019 top line and also will impact 2020, naval work and have that occur especially if orders are for new vessel programs. 2019 sales were 65% of total – I'm sorry, 2019 domestic sales were 65% of total with a full year with 70% in the quarter, which is similar to 2018.

If sales for the naval end market are extracted, which can overweight domestic sales, sales in 2018 and 2019 were 60% domestic and 40% international. Please turn your attention to Slide 10, the downward trend and trailing 12 month orders is due to customer timing. We had expected stronger order levels in the fourth quarter and also in April and May.

However, refining and certain petrochemical customers pushed order decisions. We have however developed a large opportunity set of bids for international refining end markets that is projected to close in the coming quarters and there was a significant set of opportunities for U.S. based petrochemical plants.

We added to this graph the light blue trend line. It was difficult to easily understand the trend of orders from Graham's traditional end markets that would exclude to U.S. Navy and commercial nuclear utility end markets.

This is shown with the light blue line and it shows that the trailing 12 month orders are up about 100% from the low watermark ending the second quarter of 2018. While order levels have not been as strong as we anticipated.

The pipeline for potential orders is strong however, with a large number of projects plan to close in fiscal 2020 such that we anticipate that backlog will expand across 2020. On to Slide 11, overall, and as Jeff had said, backlog is at a great level of $132 million. Navy orders are approximately half of the backlog as of March 31.

$8 million of backlog is for commercial nuclear utility business that is held-for-sale. Year-on-year, backlog expanded 12% with considerable expansion of backlog that is for chemical and petrochemical end markets. Other 7% of backlog for power end markets, 89% of that is related to the held-for-sale commercial nuclear utility business.

55% to 60% of backlog is planned to convert into sales in fiscal 2020, 10% to 15% is planned for fiscal 2021 and 25% to 35% beyond fiscal 2021. Please now turn your attention to Slide 12. Revenue guidance is between $95 million and $100 million for fiscal 2020, this excludes held-for-sale commercial nuclear utility business.

This does represent 14% to 20% top line growth. We are structured for greater top line capability. However, order timing in January through today hasn't played out. I mentioned previously that customers pushed order placement decisions. In certain cases, the push we believe is just a couple months and in others a couple quarters.

Nonetheless, with order-to-shipment cycle for large project orders being 12 to 18 months, these order placement delays cause us to judge 2020 top line to be in the $95 million to $100 million range. Gross margin modeling is 23% to 24%. I do wish to provide some context for why gross margin is set at this level.

As I noted, we are structured for greater top line capability and additional personnel plan for 2020 will be added based on our multi-year outlook for the naval end market and the encouragement that our refining and chemical end market bid pipeline offers.

I previously noted that we are anticipating year-on-year backlog expansion for fiscal 2020 year-end. Thus, personnel adds now are necessary. It isn't always possible to align personnel additions perfectly with corresponding revenue. I am investing now, we're building a bigger, better Graham and consequently that will pressure margin in 2020.

Projected SG&A spend is $17 million to $18 million for fiscal 2020. Our effective tax rate will be approximately 20%. Omar, please open the line now for questions. Thank you..

At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Theodore O'Neill, Litchfield. Please proceed with your question..

Thank you. Good morning..

Good morning, Theo..

Jeff, a question for you on the Energy Steel business. So in fiscal third quarter 2018, you recorded an impairment charge of nearly $15 million against it. And you're sighting at that time that it was because of the work stoppage at the Virgil C. Summer nuclear power plant caused by the bankruptcy at Westinghouse Electric.

Was it the final nail in the coffin for Energy Steel or is it business environment worsened?.

Theo, thanks for your question. As you've mentioned, we did have a write-down in the third quarter of fiscal 2018. At that point in time, it was going – what was occurring with Westinghouse, what was occurring with new bills in North America and the market had weakened some, over the last 15 months we've seen, for us the market weakened further.

And as the nuclear promise, focus of the nuclear industry has occurred, it's become apparent to us that they're going to be fewer suppliers and there's going to be downward pressure on pricing in that market. And we just felt that we were not well positioned and well integrated enough, vertically integrated enough in that market to be successful.

So the market has worsened and also we've ended up in a position that was not favorable for us to continue in that market..

Okay.

And going forward, will that just be recorded as a single line as discontinued operations or is that going to be still part of the whole P&L?.

In the immediate term it will be in the P&L, when you look at the balance sheet, you will see a asset held for sale as one line and liability held for sale as another line, but it will be within the P&L, is not considered a discontinued operation from an accounting standpoint.

Our expectation is to have this sale completed possibly this quarter or hopefully not too far into the second quarter, but we're targeting having the sale completed ideally by the end of the first quarter..

Okay. On the balance sheet, this is fourth quarter in a row where you've had more than $20 million in inventories.

And can you talk about the genesis of this? And if is this the new normal?.

Sure. If you’d go back and look at the balance sheet as of the end of last fiscal year, you'd see a significantly lower amount of inventory, but you'd also see a significantly lower amount of customer deposits.

One of the changes which occurred with the new revenue recognition rules was that we could no longer on the balance sheet net out the customer deposits, which were specifically used to purchase inventory on the balance sheet itself. So used to be we would net out a portion of customer deposits against inventory.

And then if you look in the footnotes, you would see here's the gross inventory, here's the net inventory netted for those customer deposits. We're no longer allowed to do that.

So you would have seen in the quarter that ended in June and then subsequent quarters, a big step up in both inventory, somewhere in the neighborhood of $10 million and a step up in customer deposits of a similar amount. So nothing has changed from an operation standpoint, is simply how we are now required to account for it..

Okay. Thanks very much..

Sure..

Our next question comes from Joe Mondillo, Sidoti & Company. Please proceed with your question..

Hi, Jim, Jeff, good morning..

Good morning, Joe..

Good morning, Joe..

So I was just wanted to ask you about the chemical/petro order trends that you've seen. And sort of just wondering what kind of timing this has transpired.

And just relative to the year, the calendar year itself, is there any concern or worry just regarding volatility in oil prices and just the general economy overall that these projects could be put back – back burner for a while or continue to be pushed out?.

Joe, this is Jim. We don’t necessarily have that concern while we are looking at the overall economy, seeing if it’s slowing down and if that will impact the pace of order decisions.

What we can judge from the contacts that we have had with our customers is, it’s not a near-term economic decision that was causing them to push order decisions to the right.

Some of it had to do with M&A that was going on within our end markets by our customers and then rationalizing their businesses and just waiting until they decided what assets went where.

We think that’s now behind a couple of customers that should enable them to move forward with the projects that are installed-based revamps, restarting some idle plants or expanding the capability of existing plants. We think those are very promising projects. There is nothing suggesting that, that won’t go ahead.

And also some other work in the petrochemical space, around new capacity, that seems very solid to us, not susceptible to back-burner or being shelved, which really would be the concern. We still feel very optimistic that the order environment across fiscal 2020 will translate into backlog expansion in a meaningful way..

Okay. And then on the oil refining side of things, the orders have been sort of fairly stable if you take out the second quarter, which is a pretty big quarter.

What you see going on in that market, especially with oil prices certainly being much – more volatile knowing that, I know that a large part of your customers are the integrated companies and volatile oil prices do effect their businesses and how they manage them? So what are you hearing within that side of the business?.

Refining on the international front around new capacity, we are very excited about the amount of work we’ve identified and that we are bidding. And that we will participate in, at least with the bidding process, and that we hope to secure for Asia, India, China, elsewhere in Asia.

And there’s a very large set of opportunities that are projected to close in 2020. And then also on the domestic front, we really don’t see a behavioral change by our end markets there. The independents will continue to invest and try and find ways to improve throughput and get more fuels out of a barrel of oil.

And the more integrated refiners, I don’t see much change there either. And so really North America seems stable to us. So it appears to be stable with a step up in pet-chem..

Okay, great. And then on the Navy side of things. In the past couple of quarters, it seems like some work has been pushed out due to timing without the ship build and submarine builds have been sort of progressing.

Can you give us an update on that? And how you’re thinking about how sort of work or your shipments sort of trend over the next several quarters or couple of years?.

With the adjustments that we made and we spoke about, I think, it was two quarters ago. We are now looking at across 20 of fairly stable quarter-to-quarter revenue level, having now adjusted how the backlog should convert. And then it should begin to expand in 2021 and 2022.

Just by way of comparison from a rough perspective, FY – fiscal 2020 naval revenue should be comparable to that of 2018 and 2017, and will be roughly twice what it was in 2019..

Okay, great. That does it for me for now. Thanks for taking my question..

Very welcome. Thanks, Joe..

Our next question comes from Tate Sullivan, Maxim Group. Please proceed with your question..

Hi. Thanks you. Thanks for that detail on the Navy revenue progression. And it sounds like it’s stable for 2020.

What are – are there any variables to the timing of delivery to the equipment that you’re making for the current aircraft and submarine schedules? And what happened before versus what are the risks that something similar can happen again in 2023, please, for Navy orders?.

Sure. The primary risk around backlog conversion for our naval work is around new vessel program, which is the design effort and going through the regulatory approval process to commence fabrication or the next stages of fabrication, that can be an execution risk. And that represents, round numbers, maybe half of our backlog business, vessel program.

The more built-to-print work, we’re on repeat orders that has a more predictable flow of backlog conversion. And then importantly, as we look at the opportunities that are beginning to show up in the bid pipeline, we do anticipate that there will be some sizable new orders that could come into our backlog across fiscal 2020..

Thank you. I think I saw it. I think it was Huntington recently started doing their – cutting the steel for the first Columbia-class submarine. Correct me if I am wrong, but have you given any context for potential margins on your Navy work versus your other work? I understand if you cannot..

We really haven’t at a quantitative level. More directionally, we have indicated that the naval work tends to carry a higher gross margin; however, will blend as the out margin satisfactorily. But we’ve not giving any specifics on that for competitive reasons and logical reasons..

Okay. Thank you. And the last one for me. Separately, I see you retaining some of your power plant business. I think it’s remaining 11% of your power projects in backlog.

How is that different? I mean besides being a different type of plant, is it different types of equipment for different types of power plants? Or what are you retaining? And why did you decide to retain that, please?.

Sure. Our held-for-sale components of our backlog are related to the commercial nuclear utility market.

We also serve in the power market, renewable cogeneration, within renewable is geothermal, waste energy; that’s the part of the power segment that we are retaining, which has a different execution, different sales model, different quality programs than would the nuclear market sales..

Okay. Thank you very much. Have a good day..

You’re welcome..

[Operator Instructions] Our next question comes from Bill Baldwin, Baldwin Anthony Securities. Please proceed with your question..

Good morning, Jim and Jeff..

Good morning, Bill..

Good morning, Bill..

Can we still work with the target gross margin looking out to kind of peak cycle in the 30% area? Is that still a reasonable expectation?.

We have not moved off of that vision and that expectation. What has to accompany that though Bill, just as a footnote or reminder, is a stronger order environment that then enables a stronger pricing environment. And that typically accompanies the gross margin list that then move out….

Right. Right.

Well, based on your commentary, things unfolded kind of as I expected 2020/21 that will be pretty good environment for new order growth, do you think that environment will be sufficient to support the kind of gross margins that your expecting, Jim?.

We’re certainly more encouraged about the size of our bid pipeline, our perceived timing of order placement and the quality of the work that we expect to win. It’s going to come down, too. I don’t want to be evasive. As we talked about over the – in the past, new capacity has a different margin profile than installed-base work.

International refining work has a different margin profile than domestic refining work. Pet-chem has lower margin profile than refining work. So there is a lot of variables at play. But from our qualitative or directional perspective, we are expecting that we should see improvement in gross margin after we get through 2020..

Very good. On the Navy bin, as you indicated about half of your backlog was new vessels, new capacity.

I didn’t understand exactly where you indicated the other half? M&A from what kind of work?.

I probably didn’t speak very clearly. The naval programs, there are repeat builds for given vessel programs where the design is already set. And then there is a new vessel program where they’re building the first vessel and the new class of vessels.

So we have some work that’s for the first vessel of a new class, and that has a more labored and a more staged engineering execution time frame. The built-to-print, we call it that for description, has a more orderly execution flow..

Right. Okay.

Now when you talk about potentially a meaningful pick up in your Navy business in 2020, is that related to new vessels? Or a combination of new plus your repeatable type business?.

That would be – and just to qualify that, that was on the order front. That would be….

Right.

So I am looking on the order front?.

That would be for both surface ships and submarines, principally surface ship..

But, would those be new designs or designs you’ve already got on to box there?.

They would be designs that we already have completed..

So it’ll be repeatable business then..

Right..

Okay. Very good. I know, at one point in one of the previous conference calls, you indicated that you are broadening out your exposure to potential Navy markets.

Is that what we are potentially looking at in 2020 and beyond? Some examples of that?.

Well, we want to expand our supply within the programs that we are currently in organically. And then we’re also looking at how we can structure with M&A to get more of the naval spend on the vessel programs or related programs that we’re in.

So, one is again, doing actions and strategic initiatives to gain more of the spend for what we ordinarily can build.

And then secondarily, because of the strength we see in the multi-decade vessel program and the perception the navy has with our capabilities and the quality of our organization, can we compliment what we currently do with additional product through an M&A approach..

Okay. Well, best of success with those programs and I guess just one final question, does the SG&A guidance that we’re looking at, does that have your – all your increased personnel expenses included in there – excuse me, Jim included in there or do you have additional personnel that will be coming in 2020 though? Sure for 2021..

Right. But that the model that we’ve given in the guidance reflects the appetite that we have for adding personnel in this current environment and the projected 2021, 2022 environment. So, we’ve incorporated that into our guidance..

So, you’re pretty well where you want to be there as far as personnel in that regard..

Bill, this is Jeff just to interject. the guidance that Jim mentioned does have our headcount in there. What the guidance does not have is anything related to our commercial nuclear utility business. So, there will be some SG&A that has impacted the company in previous year financials, which would not impact the company in fiscal year 2020..

okay. So, the 2020 guidance, if I understand that does not include SG&A from Energy Steel..

correct..

Right. The $17 million to $18 million excludes the held for sale element..

Right. Just like the revenues excluded..

And it incorporates our vision of adding personnel that go into the SG&A cost centers. So, you shouldn’t anticipate us to move above the $17 million to $18 million with the personnel ads that I’ve cited. It’s already incorporated in that spend and the guidance..

Very good. Thank you very much..

You’re welcome..

Our next question comes from Joe Mondillo, Sidoti & Company. Please proceed with your question..

Hi, guys, just a couple follow-up questions. I’m curious to sticking on Energy Steel, is the divestiture would be accretive to gross margin and our earnings this year. Not sure if you want to talk about that or developed that, but I’d be curious to know..

Accretive to 2020 or accretive had it not been in 2019.

Sorry, what’s the question?.

Either way, either way, however you want to structure it..

Should we be able to divest of Energy Steel, it will be accretive to our margins..

Okay..

And I’ll look back….

And then I also wanted to ask just on sort of cash question on your sort of your cash flow, it seems like you may have – the last couple of years, you’ve actually seen working capital as a source of cash with the ramp up in the navy work and maybe even in the petrochem, are you anticipating any spending cash from working capital? And then I also wanted – I was wondering what your CapEx budget will be this year?.

Joe, this is Jim. We would not anticipate consumption of cash tied to our growth strategies. As you might recall, we do try to structure progress payments in a manner in which helps us fund procurement of long lead materials.

But we typically have had a continual growth and balance sheet cash even while we’ve grown, it might be a quarter that has an odd use of cash, but over an extended period of time, we’re not envisioning our operating model changing materially where we would consume cash as we grew.

And then on the CapEx side, Jeff, you want to comment on that?.

Sure. Joe, CapEx is a targeted to be between $2.5 million and $2.8 million in fiscal 2020. Just following on Jim’s question, if you would go back over the last decade, you wouldn’t see that our cash position pretty much increased most every year.

I think there was one year in there where we had, and we called it out a very large customer deposit in one year and utilized it the next year. But other than that, our cash position is pretty continually increased whether we were in a good part of the market or a weaker part of the market.

And as we’re coming back into a little bit of a better part of the market, we would expect the cash flow to continue to be strong and cash position to continue to increase..

Right? Yes. I’m actually not too concerned about that. I was actually specifically asking more so on the working capital, and how you see working capital. and in the last couple of years, it’s been a source of cash.

And I was just asking, as you ramp up this Navy – your Navy work and maybe some of the petrochem does working capital, is that become a little more – do you have to invest a little more in your working capital?.

A little bit, but to Jim's point, we try to tie our projects payments to the work that we are doing so. And also as Jim mentioned, you will see quarters where we move, but I think if you look over fiscal years we would not see a significant change in our working capital over any period of time. .

And the phenomena that you saw – the very typical phenomena and as we go into a downturn and then if you look at how Graham comes out of a downturn into an expansion. In our past, again, we haven't had material working capital changes, but we would not anticipate that again..

Okay. And then just lastly, you sort of addressed it briefly just in terms of the cash position overall and potential sort of acquisition targets. It sounds like, I know you've talked about in the past and just did recently targeting certain opportunities to take advantage of this naval build-out.

But any other sort of commentary, it has obviously been a while where we haven't seen much progress from the outside.

But I'm sure there is some things going on internally, not sure if you can provide any more color on sort of the M&A opportunity?.

Joe, I understand it can be frustrating from the outside looking in that nothing has occurred, but we have been very active over the past 18 months or so and continue to be very active in both the naval – particularly the naval sector, but also looking at some aftermarket opportunities in the commercial sector. So we are very active.

We've talked in the past year or two about opportunities that we are moving out and ultimately we peeled off on. So again, that could be frustrating from the outside.

But I assure you that the amount of effort that our business development team and myself and Jim personally are spending is significantly greater today than it has been a couple of years back. And we just needed to make sure we find that right fit for Graham and move forward. But right now, we're very active.

It's just until something ultimately moves forward to closure, it's hard to say much beyond that..

Okay. Understand. Thanks a lot. Appreciate it..

Our next question comes from Bill Nicklin from Circle N Advisors. Please proceed with your question..

Good morning..

Good morning, Bill..

Good morning, Bill..

I've got just one question.

If we look at the new politics of trade and consider, let's say, pet-chem and refining, what kind of changes might you expect? And when, and where, and what configuration you're customers are going to be building in?.

Good question and a complicated question. Our view is as the – on petchem, the investments really relate to where is the lowest cost feedstock. And right now that's in North America and that's in the Middle East. But we don't envision much change in where the investments will accrue there around great politics.

And in the international markets, they still will add petchem capacity for their growing and emerging economies. Again, we don't see that dynamic changing materially. And then on refining front, as I said earlier India and China are ramping up to some very sizable new capacity adds.

I don't see global politics or trade modifying that as they are best to satisfy their local consumption, they are not export oriented nations. The Middle East of course is export oriented. They will begin their next wave of refining investment we think in a couple of more years.

So really on the overall my long-winded responses, I guess I don't feel there is much change of foot for us..

Okay. That's good.

I was just asking to hear chatter all the time regarding, particularly some of the transportation companies that are looking about where petrochemicals are going to be sourced and where they’re going to be delivered and are those roots going to change, the China may say well, we don’t want to buy as much or any ethylene from the U.S.

It would seem to me that it would have a negative impact here, but may be a positive impact at some place else, where maybe the raw material would still be sourced from North America. But the chemical plants might be built some place out and therefore you could have a pickup in your business down the road..

Sure. That's all – that's possible. What we are identifying now is the – as we said a moment ago, it’s really a race towards where’s the low-cost feedstock and deciding the plants there. And then the emerging economies trying to address local demand with local supply with new capacity there..

All right, very good. Thank you very much..

Thank you, Bill..

We have reached the end of the question-and-answer session. And I will now turn the call back over to management for closing remarks..

Thank you, Omar. And thank you everyone for your questions this morning as we talked through our fourth quarter and the decision we made on Energy Steel. We appreciate the depth of your questions and then your follow-up questions. I will look forward to updating you in August. Thank you..

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation..